Firms in crisis as Warsaw caps fees

INTERNATIONAL FIRMS are railing over legislation that could see their retreat from Poland. Last week, the heads of some of London’s top firms remained confused as to how they could head off

INTERNATIONAL FIRMS are railing over legislation that could see their retreat from Poland. Last week, the heads of some of London’s top firms remained confused as to how they could head off government plans to cap lawyers’ rates.

Firms including Allen & Overy, Clifford Chance, Linklaters and Lovells met with the Law Society and Lord Mayor of London in Warsaw earlier this month for crisis talks in which they hoped to head off Polish Government plans to cap legal fees at a maximum of just 70 euros ($110) per hour.

Nick Fletcher, managing partner of Clifford Chance’s Warsaw office, told Lawyers Weekly that the 70 euros is below the firm’s lowest rate. When asked what he would do if the legislation goes ahead, Fletcher said: “I have been asking myself that question as the prospect of the law being introduced has become more serious, and I don’t really know the answer.”

The rate, which could be introduced by as early as the end of 2007, is calculated to represent 30 per cent of the Polish monthly minimum wage. Fletcher said it has been met with equal horror by Poland’s commercial firms and other international firms with offices in Warsaw.

Clifford Chance has more than 90 lawyers in Warsaw, most of whom are Polish, together with four from England (two of whom are Australian-qualified), three Ukrainians and one from Spain.

Fletcher, who has been in Warsaw with Clifford Chance for more than 13 years, said the plan affects all the fees that can be charged by Polish lawyers. “So it basically affects all of my team, and most likely me as a registered foreign lawyer here.” Lawyers who come under the authority of the Polish Bar Council will be subject to the provision.

The legislation involves more than just reducing fees charged by lawyers, said Fletcher.

“The government here has quite a hostile position, vis-à-vis the two Polish Bar authorities. You have two Polish Bars here: the advocates and the legal advisers Bar. The government is keen to open up the profession and ensure more students can get access to the profession, which we are very much in favour of,” he said.

Traditionally the Polish Bar Association and the advocates’ Bars in particular are restrictive in terms of who they allow to do their qualification course, said Fletcher. The government’s policy would see this overthrown.

The provision regarding fees is part of the policy and puts pressure on the Bar authorities in other areas, said Fletcher. It deals with a concern with what the Polish criminal advocacy Bar is able to charge because there is a relatively small number of them in certain areas. “They are able to charge correspondingly inflated fees,” he said.

But as the government tries to open up the profession, it is failing to take into account the economics of international firms and larger Polish firms.

“Our competitors here amongst the independent Polish firms will have similar economics to us — they will be charging similar fees and paying similar salaries. They will be affected in just the same way,” said Fletcher.

In their meeting with the vice minister of justice in Warsaw, he said the concerns of the English Law Society, the British Ambassador and the Lord Mayor of London had been acknowledged.

“We had a sympathetic hearing and quite a positive response, but obviously we need to see what happens with the legislation at the next stage,” he said.

“If it is introduced I am not sure, quite frankly, what we will do. We have to comply with local law and we would be uncomfortable with any structure that in any way was seen as trying to avoid the law. To be quite frank we don’t know what to do, because the economics of complying with the legislation would be very destructive.”

Taylor Root recruitment consultant, Kiran Sangha, said most firms in Warsaw are charging about 300—400 euros ($475—630) an hour. And while the recruitment agency has not heard a huge outcry from international firms about the Polish Government’s decision, as it is not a huge market, she anticipates a major exodus of UK firms pulling out of Poland. “It will no longer be viable for them to be there,” she said.

But the possibility of moving all the firm’s lawyers out of Warsaw into other offices is unlikely, suggested Fletcher. “All of us live here; this is our home,” he said.

“As for our Polish lawyers, just moving from the country doesn’t necessarily mean the law doesn’t apply to them as they will still be members of the Bar. They would have to all deregister from the Bar, which would mean giving up the thing they spent many years trying to qualify for. But this in turn affects what they can do. It would be difficult for them to do litigation work and sign certain opinions. And it seems odd to have to drive lawyers to those extremes,” he said.

Clifford Chance’s other offices agree that it cannot see how the legislation is consistent with European Union law, nor any practice in any other jurisdiction. “So obviously Clifford Chance generally is not happy with this,” said Fletcher.

Taylor Root’s Sangha said some firms may transfer lawyers into other offices, but noted that this would inevitably be detrimental to the market, and for companies that use the international firms and their expertise. For recruitment agencies, Sangha anticipates that the Polish Government’s plans won’t heavily impact them.

“We don’t really get that many roles, and it’s not a major market that we recruit into. If this was going to happen in Moscow, Amsterdam or Paris there would be a major impact as they are very busy from a recruitment perspective. But Warsaw is not a frantic region for us.”

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